October 02, 2013

In Shutdown, Government Contracts Lawyers Confront Challenges

Government
contract lawyers in Washington were counseling clients
in the days before the government shutdown Monday at midnight. The chief
concern for clients and attorneys: the longer the shutdown goes, the more
complicated the legal issues will become.

"The
shutdown is only going to cause more thorny legal issues between government
contractors and the government," said Robert Nichols, co-chairman of
Covington & Burling's government contracts practice.

Issues
including unintended costs, work stoppage and general delays can prove
increasingly troublesome if the shutdown drags on. Practitioners said that contractors
should take different approaches to the shutdown depending on specific agreements
with the government.

"If you are
a large manufacturer of goods and you have long term contracts that are fully
funded, a short-to-middle term shutdown is not harmful," said Matthew
Haws, government contracts counsel to Wilmer Cutler Pickering Hale and Dorr.
"If you are a services contractor who needs to gets into government
buildings, it is going to be more difficult."

Part of the
problem could arise from the lack of contact that lawyers and their clients
will have with government officials. Hundreds of thousands of federal employees
are furloughed.

"If
the government is shut down and can't give you guidance, you are at risk,"
said Angela Styles, co-chairwoman of Crowell & Moring's government
contracts practice. A construction contractor, for example, Styles said, may
not know how many supplies it should order or if the funding for it will be
available once the order is places.

Additionally,
the closure of the Government Accountability Office has temporarily eliminated
a venue for the filing of bid protests. That could hamstring contractors who
are seeking to challenge an award. The other venue, the U.S. Court of Federal
Claims in Washington, poses additional hurdles and a potentially longer time
frame for the resolution of protests.

For attorneys in
government contracts practices, the shutdown means an immediate slowdown of
work. But lawyers expect that the shutdown could lead to a flurry of challenges
over reimbursement claims once the full government is operational again.

When
the shutdown ends, contractors will likely ask the government to cover expenses
such as labor and other unforeseen costs incurred during the shutdown. Attorneys
are advising their clients to keep close track of their expenses.
"As is the case with any contractual issue, to the extent it drags on, it
is going to result in more work for lawyers," Haws said.

Some contractors, Nichols, said, could be paid
automatically for idle labor costs. Others, on the flip side, he said, could be
required to go through a claims process. Still, Nichols cautioned, other
contractors might not be reimbursed for costs incurred during the shutdown.

Nichols likened
the government shutdown to the 2010 Snowmageddon storm that blanketed the
Washington region in more than two feet of snow.

"Everyone
is watching the snow come down," Nichols said. "Once it's over, then
we will determine how to dig out."